Sunday, October 11, 2009

CEO remuneration

Economic Times says that a rough and ready calculation shows that top managers get remunerated to the extent of Rs.1.5 lac for every year of experience. This is an average measure and does not betray the stratospheric salaries earned by (or more precisely showered on ) some CEOs. The newspaper also reports that top management compensation grew in FY 09 much faster than corporate sales or profits. Recessionary trends were perhaps responsible for this.The minister for company affairs recently asked CEOs to avoid 'vulgar' levels of (self-)remuneration. Corporate bigwigs rallied immediately against government dictates. The minister softened his stand. The prime minister has now said that the decision is with the companies. Last year the prime minister exhorted the CEOs to be more careful regarding their pay.It is suggested in some quarters that shareholders ought to become more active in approving the compensation to top management. Well, compensation committees are very much in place in many companies though it is very doubtful if they are taking their role seriously. What do the shareholders do when the compensation details are placed for approval? They unanimously pass such resolutions.Shareholder activism simply does not exist in our country. Recently, in the AGM of one Chennai-based company, one shareholder expressed his view that a particular director who was too busy to attend any of the committee meetings and AGM of the company should not be re-elected. This opinion was supported by two other shareholders. When the resolution for re-electing the said director was taken up, one of the latter two shareholders duly proposed the resolution and the other one seconded the proposal. So much for shareholder activism !